by tomnora | Jan 23, 2012 | Angel Investor, early stage, founder, Launch, Revenue Growth, Scalability, startup, startup CEO
This article written by Mark Henderson of Plancast took a lot of courage. The Uphill Battle Of Social Event Sharing: A Post-Mortem for Plancast | TechCrunch http://j.mp/wCnYov
By putting the words Post-Mortem in the title he made it very clear that the company is failing, a shocking move in our current startup world. So many companies/people/vcs pretend they are succeeding when they are stuck – can’t scale revenues, especially over the past 5 years or so. Once they finally shut it down they often still claim success, or invoke the over-used “pivot” panacea.
By calling it as it is, Mr. Henderson allows a true discussion about what went wrong and other strategies that could possibly change the fate of Plancast and other startups in the same position. He is also helping other startup leaders and investors to possibly follow his lead of raw honesty, so this industry can focus more resources on a smaller number of companies that truly have something special and defendable. That helps people to better learn how to do it right, contribute to bigger better businesses, create profits.
In several of my past postings I’ve touched on this problem. It’s endemic to the startup world right now, and can’t lead to a good future. Of course startups always have a low probability of success anyway, but this current environment of pretending like every company that gets angel or super-angel seed funding is made up of geniuses with genius ideas is a house of cards. Articles like that above could start the process of correcting the market back to realism and eventually streamline resources. Mark has put his ego aside and done a great service to all of us. And who knows, by publishing the companies issues he may crowd source some answers (and funding) to actually save his company.
Here are some of the comments people made about this article:
“I hope TechCrunch publishes more well-composed articles like this in the future.”
“This industry is lacking such honest analysis. Thanks for keeping everything so real.”
“I greatly respect you posting this as a way to help others learn when you could have just disappeared in the startup abyss.”
Ii looks like the beginning of several who will come forward soon. What’s the lesson here? I guess more journalists should launch startups. @tomnora
by tomnora | Dec 26, 2011 | Angel Investor, Business Development, CEO Succession, early stage, founder, Launch, Revenue Growth, Scalability, startup, startup CEO
One of the things I tend to obsess about these days is startups that have little or even no real lifespan. Almost every day I uncover another one, some even with significant funding. In greater Los Angeles, now being called Silicon Beach, this problem seems to be more prevalent than in most areas. So many people make their goals to just b a startup, get it started and look for funding, without much thought about multi-year growth and sustainability, i.e. Scalability.
A common area of neglect in this early stage is people – Scalable People. Startup founders tend to add people that are close to them – friends, coworkers, spouses, family, neighbors, roommates, similar age, etc. These folks are very accessible and trustworthy, not much interviewing required, and often will start working with little or no compensation. It’s good to have some of these. The biggest downside is that eventually you will have to extract or diminish the roles of most (not all) of these people.
I once had an early employee at a startup I took over who was sales, marketing, receptionist and payroll. Early on we were lucky to have her doing all those things, and she received great stock options for being an early employee. But as we grew there was no doubt that we needed to replace her in most areas with a professional team that could scale with the job. Every change we made pissed her off and she fought for her position, which was counter-productive to our growth. She eventually left with some bitterness, but that went away once we went public and she could pay off her mortgage entirely.
You also have to mix it up as early as possible with real professionals that can scale when the company grows- people who “think differently”, have different experiences, drive initiative that none of you have even thought of, and want the company to be much bigger. These days a popular add in Los Angeles is someone from Silicon Valley; it adds a realness to the group and gets investors excited.
I’ve been on all sides of this situation – I’ve been the founder trying to attract the best people, and just as often I’ve come in as the “suit” to a small group of founders and early employees. It’s more work and trickier to splice the 2 groups together than to just use your inner circle, but it’s the only way to grow now and later. Please contact me if you want to discuss your startup. @tomnora
by tomnora | Jul 27, 2011 | early stage, founder, Revenue Growth, Scalability, startup, startup CEO
Aurum Rex. Nummus Rex. Emptor Rex.
I.e. Cash Is King. An old sayings, but so true in the startup growth equation. Where does revenue fall here? Is it more or less important? What about Strategy? Revenue? Growth? Buzz? Profit? A “Right On” product?. Smart People? Ambition? Your position on the Bell Curve?
When a startup has none, cash seems like liquid gold that can flow over the business and cure all – salaries, resources, exposure, growth, success, new offices, marketing. But often entrepreneurs fool themselves into thinking that lack of cash is their only problem. I’ve been involved or almost involved in so many early stage companies that said “If only we had $XXX in cash, everything would be o.k. Sometimes they get the new cash but still can’t scale or survive. Cash is certainly required to play, but it has to be part of a larger system, purpose, goal.
Venture capitalists, controllers of cash, are always looking for mind blowing new things that can “change the world”; can step out in front of our regular world and catch fire, anticipate what the world needs that no one else has figured out yet. And they have cash, high risk cash, to take a shot at being part of these new phenomenons. They get in early and guess at the future, which means they could be often wrong. But that’s not a problem; they only have to be right once in a great while to win big. That’s the game they’re in. What an exciting job!
On the other side we have the yet-to-be-funded or need-more-funding startup. Whatever cash is in this company is less than enough to spark it to the next level quickly enough to meet the business goals, or often just to make the next few payrolls. Is this you?
So what about REVENUE? Revenue is close to cash in it’s power within a startup. It can solve so many problems, including cash issues. It attracts more cash investment, it creates profits, it legitimizes your business. Revenue has to be managed properly and leveraged wherever possible, but those are good problems to have. It’s eventually more important than cash, especially when it’s steadily and predictably growing. Growing revenues, not cash, create higher valuations.
Early on, most startups focus more on adoption, eyeballs, users, traffic, assuming these will infer and convert to future revenue (Twitter, Google, Zynga, Facebook). The actual cash on hand and/or revenues don’t fully support the business, but no problem if major growth is apparent.
So is that it? User adoption? For Twitter it is, they’re currently at a valuation of 40X revenues, way high. But there’s no question that they’re permeating the globe, possibly with more longevity than Facebook.
The bottom line is value. What value, how many valuable things is your company providing. What’s better, cheaper, faster, unique, easier. Google is a great example of amazing and increasing value to user. It’s all of the above, mostly free, with an attitude of always wanting to provide more to its users while simultaneously simplifying use of everything digital.
Early on Google didn’t focus much on cash or revenue; they eschewed it, they had a higher goal – organize all the worlds information. Their goal and execution of it was most important to them. Of course they also happened to be a few blocks away from the highest concentration of venture capitalists on the planet, but they went 3 years without VC funding. Their first 2 years they had no revenues and received only $100K in funding, from Andy Bechtolsheim. A year later they raised $25 million. Their great ideas and excellent execution came before any cash.
So maybe cash shouldn’t be #1 for an ambitious startup, rather amazingness should, true passion, even if it’s nights and weekends around your day job.
@tomnora @cowlow @norasocial
by tomnora | Jun 30, 2011 | CEO Succession, founder
The vast majority of early stage companies will companies replace the CEO in the first 2-3 years.
A person or group peers starts with an idea and turns a spark into a flame. Once that flame is s going they don’t want to let it die. They often conclude that a more seasoned, well connected, well rounded CEO will attract money, partners and revenues, taking the company to “The Next Level“.
All this will hopefully help the company grow in the right ways and produce cash flow. Cash allows small companies to fulfill growth and other objectives; cash generated organically helps do this without giving up ownership and control.
But t’s a bit more complicated. Introducing a new leader, whether internal or external, voluntarily or forced, s a delicate process. I’ve been the incoming CEO a few times, and found that acceptance happens quickly or usually not at all. Most startups have no experience doing this, are not prepared, and cause their company damage by not doing this correctly – they accidentally blow out the flame.
There are some basic guidelines that can help make the new CEO stick.
1. Choose the New CEO Very Carefully. This is where most startups make the wrong choice. They base their choice on the wrong criteria and/or a limited pool of candidates, or peer pressure, or using one of the investors, etc. Be methodical and objective here. Engage experts if possible.
2. Put The Egos Away – mMake sure everyone is on board and understands that the new CEO is the right answer, including the outgoing CEO. Outgoing CEOs who can’t let go are one of the top reasons early stage companies fail at this process.
3. No Sacred Cows – Allow the new CEO to make the changes he/she wants mmediately. This requires trust on the part of the extant management team but you must let them manage the whole puzzle, not just parts of it (see #1).
f these things are done correctly the succession process can actually be a great experience for all involved. If you would like to discuss further please contact me. @tomnora
